What Are Trade Secrets?
Trade secrets are technical or business information held by companies that are protected under Japan's Unfair Competition Prevention Act (UCPA). Typical examples include customer lists, manufacturing know-how, pricing information, and R&D data.
Three Requirements for Trade Secrets
To qualify as a "trade secret" under the UCPA, information must meet all three requirements (Article 2(6)).
Secrecy Management
The information must be managed as a secret. Merely intending it to be secret is insufficient; there must be objectively recognizable management measures.
Specific measures: - Marking documents as "Confidential" - Access restrictions on electronic data (passwords, permissions) - Non-disclosure agreements (NDAs) - Physical storage in locked locations - Clear notification to employees that information is confidential
Usefulness
The information must be useful for business activities. This includes both technical information and business information such as customer data and sales strategies.
Even failed experiment data may qualify if it helps avoid repeating mistakes.
Non-Public Knowledge
The information must not be publicly known. Information available in publications or on the internet does not meet this requirement.
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Try for free →Types of Unfair Competition
The UCPA regulates the following acts regarding trade secrets as "unfair competition" (Article 2(1), items 4-10).
Wrongful Acquisition (Items 4-6)
- Acquisition through theft, fraud, or coercion
- Use or disclosure of wrongfully acquired information
- Acquisition with knowledge (or gross negligence) of wrongful origin
Wrongful Use (Items 7-9)
- Use or disclosure of legitimately obtained trade secrets in breach of duty of good faith
- Former employees using trade secrets from their previous workplace
- Using a former employer's trade secrets at a new company
Civil Remedies
Injunction (Article 3)
You can seek to stop unauthorized use or disclosure of trade secrets. Preventive injunctions are also available.
Damages (Article 4)
Compensation for losses caused by unfair competition. Presumption provisions (Article 5) reduce the burden of proof.
Credit Recovery (Article 14)
Courts can order measures to restore business reputation, such as corrective advertising.
Criminal Penalties
Trade Secret Infringement (Article 21)
| Act | Penalty |
|---|---|
| Wrongful acquisition/use/disclosure | Up to 10 years imprisonment or ¥20 million fine |
| Cross-border offense | Up to 10 years imprisonment or ¥30 million fine |
| Corporate fine | Up to ¥500 million (domestic) / ¥1 billion (cross-border) |
Attempted Offenses
Attempted trade secret infringement is also punishable (Article 21(4)).
Building a Secret Management System
A daily management system is essential for obtaining legal protection.
Information Classification
Clearly identify trade secrets to be protected and classify by importance level.
Access Control
- Limit access to those with a "need to know"
- Maintain and store access logs
- Immediately deactivate departing employees' accounts
Contractual Protection
- Confidentiality agreements with employees
- NDAs with business partners
- Confidentiality pledges upon departure
- Non-compete obligations (within reasonable scope)
Training and Communication
- Conduct regular training
- Establish and communicate information management policies
- Set up incident reporting systems
Responding to Data Theft by Departing Employees
Preventive Measures
- Confirm confidentiality obligations during exit interviews
- Verify whether company data has been taken
- Collect work PCs and deactivate accounts
Post-Incident Response
- Preserve evidence (access logs, emails)
- Send formal warning via registered mail
- Apply for preliminary injunction
- Pursue damages and/or criminal charges
Summary
The key to legal protection of trade secrets is secrecy management. No matter how useful or non-public the information, it cannot be protected without proper management. Building a daily information management system and preparing for potential leaks is essential.